What moves housing markets: A variance decomposition of the rent–price ratio

We apply the dynamic Gordon growth model to the housing market in 23 US metropolitan areas, the four Census regions, and the nation from 1975 to 2007. The model allows the rent–price ratio at each date to be split into the expected present discounted values of rent growth, real interest rates, and a housing premium over real rates. We show that housing premia are variable and forecastable and account for a significant fraction of rent–price ratio volatility at the national and local levels, and that covariances among the three components damp fluctuations in rent–price ratios. Thus, explanations of house-price dynamics that focus only on interest rate movements and ignore these covariances can be misleading. These results are similar to those found for stocks and bonds.     

Mixed methods studies in entrepreneurship research: Applications and contributions

Mixed methods research is becoming an increasingly popular approach in several fields. However, its application in the field of entrepreneurship has not been studied. The authors reviewed the use of mixed methods research in three entrepreneurship journals and two leading generalistic journals that publish entrepreneurship research, examining the main purposes and designs. A total of 955 articles were reviewed and 81 mixed methods studies were identified. The analysis of these articles revealed opportunities associated with the application of this approach. Mixed methods may help to improve entrepreneurship research addressing challenges emphasized in earlier studies. Suggestions on why and how to use mixed methods research are offered, and recommendations are provided to guide future mixed methods studies to advance our understanding of the entrepreneurial phenomenon.     

The Stewardship Role of Analyst Forecasts,and Discretionary Versus Non-discretionary Accruals

We examine the interaction between discretionary and non-discretionary accruals in a stewardship setting. Contracting includes multiple rounds of renegotiation based on contractible accounting information and non-contractible but more timely non-accounting information. We show that accounting regulation aimed at increasing earnings quality from a valuation perspective (earnings persistence) may have a significant impact on how firms rationally respond in terms of allowing accrual discretion in order to alleviate the impact on the stewardship role of earnings. Increasing the precision of more timely non-accounting information (analyst earnings forecasts) increases the ex ante value of the firm and reduces costly earnings management. There is an optimal level of reversible non-discretionary accrual noise introduced through revenue recognition policies. Tight rules-based accounting regulation, as opposed to leaving firms more choice over non-discretionary accrual policies, may lead firms to rationally respond by inducing costly earnings management. More generally, regulating both earnings persistence and the tightness of admissible auditing policies may not result in less equilibrium earnings management.     

The Relevance of Financial versus Non-Financial Information for the Valuation of Venture Capital-Backed Firms

This study examines the relevance of financial and non-financial information for the valuation of venture capital (VC) investments. Based on a hand-collected data set on venture-backed start-ups in Germany, we investigate the internal due diligence documents of over 200 investment rounds. We document that balance sheet and income statement items capture as much economic content as verifiable non-financial information (e.g. team experience or the number of patents) while controlling for several deal characteristics (e.g. industry, investment round, or yearly VC fund inflows). In addition, we show that valuations based on accounting and non-accounting information yield a level of valuation accuracy that is comparable to that of publicly traded firms. Further analyses show that the industry-specific total asset multiples outperform the popular revenue multiples but lead to significantly less accurate results than those obtained from the more comprehensive valuation models. Overall, our findings might inform researchers and standard-setters of the usefulness of accounting information for investment companies and provide additional evidence to gauge the overall valuation accuracy in VC settings.     

International Differences in Conditional Conservatism – The Role of Unconditional Conservatism and Income Smoothing

Abstract

Prior research documents that conditional conservatism, measured as the asymmetric timeliness of earnings reflecting bad vs. good news, varies with cross-country differences in institutional regimes. In this paper, we examine the determinants of conditional conservatism and related earnings attributes internationally. First, using panel data, we investigate whether competing earnings attributes such as unconditional conservatism and income smoothing affect conditional conservatism and its international differences. We find that these attributes are predictably correlated with conditional conservatism. Second, we address the question whether income smoothing and conditional conservatism are two fundamentally different earnings attributes. We show theoretically that both attributes yield different earnings distributions and that the motivations for producing earnings which possess these attributes differ. To test these predictions empirically, we calculate firm-specific time-series measures of asymmetric timeliness, using a novel trigonometric measure based on the standard Basu (1997)-type regression. Using this cross-sectional data, we test whether conditional conservatism and income smoothing are different and find them to be only weakly correlated for a broad international sample. Also, we demonstrate that income smoothing explains international differences in conditional conservatism. Finally, we estimate simple determinant models of conditional conservatism and income smoothing, showing that both earnings attributes are driven by different explanatory firm-level factors: Conditional conservatism increases with the importance of debt financing, while income smoothing increases with the importance of dividends. Despite some important limitations, we believe our results to be meaningful because they show that cross-country differences in conditional conservatism are influenced by the effects of other accounting properties, predominantly income smoothing. Especially, legal regime appears to drive income smoothing while losing its explanatory power for conditional conservatism when firm-specific factors are controlled for.     

A comparative perspective on gender and accountancy

Different theoretical approaches have been used to examine the process of assimi-lation of women into professional occupations. A Franco-British comparative study of women's incorporation into accountancy is used to test the explanatory value of different bodies of theory. The research suggests that the integration of women into the profession may have progressed further in France than in Britain, and that the process is influenced by societal characteristics. Differences in the relationship between training, the role of professional associations, organiza-tional structure and the public policy environment are shown to affect women's choices and career opportunities.     

NPM merger mania Lessons from an early case

A central doctrine of NPM requires the adoption of commercial management techniques to address the espoused goals of saving money and improving collaboration and service co-ordination. This article examines the evidence base for NPM mergers and uses study data to explain how two ingrained features of professional work helped to produce unintended outcomes at an early UK case involving a specialist mental health provider and an acute trust. The emergence of a de facto mental health trust within the merged entity arose from senior professionals' capacity to ‘buffer’ the work of colleagues from the rationalizing spectre of the merger. The persistence of ‘loosely coupled’ practices and structures restricted improvements in collaboration and service co-ordination. It is argued that these two enduring characteristics of professional organization will shape the outcomes of future NPM mergers in mental health care e.g. the creation of social care trusts and mental health ‘super-trusts’) and in other fields such as higher education.     

NOTES ON CONTRIBUTORS

Abstract

Within public administration and policy sciences the concept of policy networks nowadays is well accepted. Not much attention has been paid so far to strategies aimed at institutional design. Therefore, in this article, we develop a conceptual framework to study institutional design more thoroughly. We do this by specifying the nature and variety of institutional rules that guide the behaviour of actors within networks. Given this categorization of rules, we identify possible strategies to change network rules. Next, we focus on the strategic context of attempts to influence the nature of institutional rules: the process of institutional design. We conclude with suggestions to apply the conceptual framework to empirical research into the forms, impacts and implications of attempts to change the institutional features of policy networks.     

Examining human resource management outsourcing in Hong Kong

This study explored the state of human resource (HR) outsourcing in the Asian context, a particularly important subject given its rapid proliferation in Europe and North America, the inconsistent and limited evidence from prior research, and its strategic importance to the human resource management (HRM) function. Drawing on both quantitative and qualitative data and the transaction cost, resource-based, and institutional perspectives, we found that although respondents were generally favourable towards outsourcing, that in practice its adoption and diffusion were in a nascent stage in Hong Kong. Decisions to outsource were, by and large, incremental and experimental and influenced by a range of contextual factors (e.g., availability of in-house expertise, skills and creativity, strategic priorities, legislation (coercive), availability of external service providers, and industry and peer (mimetic) influence). Despite considerable pressure to cut costs, instead of outsourcing in the first instance, firms placed greater emphasis on maximising internal resource utilization (insourcing). Implications for practice and suggestions for future research are also provided.     

Optimal regime switching and threshold effects

We consider a general control problem with two types of optimal regime switch. The first one concerns technological and/or institutional regimes indexed by a finite number of discrete parameter values, and the second features regimes relying on given threshold values for given state variables. We propose a general optimal control framework allowing to derive the first-order optimality conditions and in particular to characterize the geometry of the shadow prices at optimal switching times (if any). We apply this new optimal control material to address the problem of the optimal management of natural resources under ecological irreversibility, and with the possibility to switch to a backstop technology.